ACCENDRA HEALTH INC/VA/ 10-Q

Item 1. Financial Statements Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2020 2019 2020 2019 Net revenue $ 2,187,928 $ 2,292,752 $ 6,118,340 $ 7,020,296 Cost of goods sold 1,843,589 2,012,130 5,236,035 6,176,537 Gross margin 344,339 280,622 882,305 843,759 Distribution, selling and administrative expenses 262,538 248,661 758,320 767,986 Acquisition-related and exit and realignment charges 6,382 4,522 18,500 14,776 Other operating (income) expense, net ( 134 ) 1,329 ( 3,020 ) 2,385 Operating income 75,553 26,110 108,505 58,612 Interest expense, net 20,975 24,050 65,923 75,557 Other expense, net 1,093 550 1,387 4,014 Income (loss) from continuing operations before income taxes 53,485 1,510 41,195 ( 20,959 ) Income tax provision (benefit) 7,404 ( 1,910 ) 3,863 ( 3,726 ) Income (loss) from continuing operations, net of tax 46,081 3,420 37,332 ( 17,233 ) Loss from discontinued operations, net of tax — ( 2,196 ) ( 58,203 ) ( 6,115 ) Net income (loss) $ 46,081 $ 1,224 $ ( 20,871 ) $ ( 23,348 ) Income (loss) from continuing operations per common share: basic and diluted $ 0.76 $ 0.06 $ 0.61 $ ( 0.28 ) Loss from discontinued operations per common share: basic and diluted — ( 0.04 ) ( 0.95 ) ( 0.11 ) Net income (loss) per common share: basic and diluted $ 0.76 $ 0.02 $ ( 0.34 ) $ ( 0.39 ) See accompanying notes to consolidated financial statements. 3 Table of Contents Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2020 2019 2020 2019 Net income (loss) $ 46,081 $ 1,224 $ ( 20,871 ) $ ( 23,348 ) Other comprehensive income (loss), net of tax: Currency translation adjustments (net of income tax of $ 0 in 2020 and 2019) 5,173 ( 9,038 ) 7,003 ( 5,793 ) Change in unrecognized net periodic pension costs (net of income tax of $ 47 and $ 135 in 2020, and $ 61 and $ 187 in 2019) 167 199 932 593 Net unrealized gain (loss) on derivative instruments (net of income tax of $ 831 and income tax benefit of $ 3,232 in 2020, and $ 1,225 and $ 4,866 in 2019) 1,681 ( 1,789 ) ( 9,792 ) ( 9,464 ) Total other comprehensive income (loss), net of tax 7,021 ( 10,628 ) ( 1,857 ) ( 14,664 ) Comprehensive income (loss) $ 53,102 $ ( 9,404 ) $ ( 22,728 ) $ ( 38,012 ) See accompanying notes to consolidated financial statements. 4 Table of Contents Owens & Minor, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) September 30, December 31, (in thousands, except per share data) 2020 2019 Assets Current assets Cash and cash equivalents $ 77,256 $ 67,030 Accounts receivable, net of allowances of $ 20,135 and $ 21,015 688,884 674,706 Merchandise inventories 1,095,410 1,146,192 Other current assets 235,983 79,372 Current assets of discontinued operations — 439,983 Total current assets 2,097,533 2,407,283 Property and equipment, net of accumulated depreciation of $ 273,403 and $ 245,718 301,299 315,427 Operating lease assets 143,362 142,219 Goodwill 390,395 393,181 Intangible assets, net 251,615 285,018 Other assets, net 112,911 99,956 Total assets $ 3,297,115 $ 3,643,084 Liabilities and equity Current liabilities Accounts payable $ 946,116 $ 808,035 Accrued payroll and related liabilities 71,406 53,584 Other current liabilities 412,483 231,029 Current liabilities of discontinued operations — 323,511 Total current liabilities 1,430,005 1,416,159 Long-term debt, excluding current portion 1,099,645 1,508,415 Operating lease liabilities, excluding current portion 120,025 117,080 Deferred income taxes 75,009 40,550 Other liabilities 121,096 98,726 Total liabilities 2,845,780 3,180,930 Commitments and contingencies Equity Common stock, par value $ 2 per share; authorized - 200,000 shares; issued and outstanding - 63,716 shares and 62,843 shares 127,432 125,686 Paid-in capital 262,002 251,401 Retained earnings 116,465 137,774 Accumulated other comprehensive loss ( 54,564 ) ( 52,707 ) Total equity 451,335 462,154 Total liabilities and equity $ 3,297,115 $ 3,643,084 See accompanying notes to consolidated financial statements. 5 Table of Contents Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) Nine Months Ended September 30, (in thousands) 2020 2019 Operating activities: Net loss $ ( 20,871 ) $ ( 23,348 ) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 69,494 88,204 Share-based compensation expense 15,275 12,057 Loss on divestiture 65,472 — Provision for losses on accounts receivable 9,583 9,759 Deferred income tax expense (benefit) 25,017 ( 11,989 ) Changes in operating lease right-of-use assets and lease liabilities ( 1,328 ) ( 1,280 ) Changes in operating assets and liabilities: Accounts receivable ( 20,173 ) 73,986 Merchandise inventories 52,605 136,021 Accounts payable 136,156 ( 221,381 ) Net change in other assets and liabilities ( 69,117 ) 69,756 Other, net 6,083 7,320 Cash provided by operating activities 268,196 139,105 Investing activities: Proceeds from divestiture 133,000 — Additions to property and equipment ( 21,678 ) ( 31,224 ) Additions to computer software ( 4,702 ) ( 6,928 ) Proceeds from sale of property and equipment 178 220 Proceeds from cash surrender value of life insurance policies 6,032 — Cash provided by (used for) investing activities 112,830 ( 37,932 ) Financing activities: Proceeds from issuance of debt 150,000 — Repayments under revolving credit facility ( 107,900 ) ( 36,100 ) Repayments of debt ( 270,399 ) ( 40,700 ) Financing costs paid ( 10,367 ) ( 4,313 ) Cash dividends paid ( 467 ) ( 5,072 ) Other, net ( 5,822 ) ( 3,109 ) Cash used for financing activities ( 244,955 ) ( 89,294 ) Effect of exchange rate changes on cash and cash equivalents 6,721 ( 2,243 ) Net increase in cash, cash equivalents and restricted cash 142,792 9,636 Cash, cash equivalents and restricted cash at beginning of period 84,687 103,367 Cash, cash equivalents and restricted cash at end of period $ 227,479 $ 113,003 Supplemental disclosure of cash flow information: Income taxes received, net of payments $ ( 1,892 ) $ ( 12,085 ) Interest paid $ 61,271 $ 76,470 See accompanying notes to consolidated financial statements. 6 Table of Contents Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Changes in Equity (unaudited) (in thousands, except per share data) Common Shares Outstanding Common Stock ($2 par value ) Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity Balance, December 31, 2019 62,843 $ 125,686 $ 251,401 $ 137,774 $ ( 52,707 ) $ 462,154 Net loss ( 11,324 ) ( 11,324 ) Other comprehensive loss ( 39,405 ) ( 39,405 ) Dividends declared ($ 0.0025 per share) ( 127 ) ( 127 ) Share-based compensation expense, exercises and other 42 84 4,956 5,040 Balance, March 31, 2020 62,885 125,770 256,357 126,323 ( 92,112 ) 416,338 Net loss ( 55,627 ) ( 55,627 ) Other comprehensive income 30,527 30,527 Dividends declared ($ 0.0025 per share) ( 156 ) ( 156 ) Share-based compensation expense, exercises and other 852 1,704 2,376 4,080 Balance, June 30, 2020 63,737 127,474 258,733 70,540 ( 61,585 ) 395,162 Net income 46,081 46,081 Other comprehensive income 7,021 7,021 Dividends declared ($ 0.0025 per share) ( 156 ) ( 156 ) Share-based compensation expense, exercises and other ( 21 ) ( 42 ) 3,269 3,227 Balance, September 30, 2020 63,716 $ 127,432 $ 262,002 $ 116,465 $ ( 54,564 ) $ 451,335 Balance, December 31, 2018 62,294 $ 124,588 $ 238,773 $ 200,670 $ ( 45,612 ) $ 518,419 Net loss ( 14,096 ) ( 14,096 ) Other comprehensive loss ( 6,423 ) ( 6,423 ) Dividends declared ($ 0.0025 per share) ( 119 ) ( 119 ) Share-based compensation expense, exercises and other 642 1,284 2,774 4,058 Balance, March 31, 2019 62,936 125,872 241,547 186,455 ( 52,035 ) 501,839 Net loss ( 10,476 ) ( 10,476 ) Other comprehensive income 2,387 2,387 Dividends declared ($ 0.0025 per share) ( 114 ) ( 114 ) Share-based compensation expense, exercises and other 28 56 3,209 3,265 Balance, June 30, 2019 62,964 125,928 244,756 175,865 ( 49,648 ) 496,901 Net income 1,224 1,224 Other comprehensive loss ( 10,628 ) ( 10,628 ) Dividends declared ($ 0.0025 per share) ( 175 ) ( 175 ) Share-based compensation expense, exercises and other ( 102 ) ( 204 ) 4,160 3,956 Balance, September 30, 2019 62,862 $ 125,724 $ 248,916 $ 176,914 $ ( 60,276 ) $ 491,278 See accompanying notes to consolidated financial statements. 7 Table of Contents Owens & Minor, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) (in thousands, unless otherwise indicated) Note 1— Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, or our) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The Movianto business represents a component that met accounting requirements to be classified as discontinued operations and held-for-sale beginning December 31, 2019. In accordance with GAAP, the results of operations and financial position of the Movianto business are presented as discontinued operations through June 18, 2020 (the Divestiture Date) and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. and its subsidiaries. See Note 3 for additional information regarding discontinued operations. The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Actual results may differ from these estimates. Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less. Cash, cash equivalents and restricted cash are stated at cost. Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in the United States, Europe, and Asia. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. Restricted cash included in other current assets represents cash held in a designated account as of September 30, 2020 as required by the Fifth Amendment to the Credit Agreement, which stipulates that the cash held within this account is to be used to repay the 2021 Notes or the Term Loans. Restricted cash included in Other assets, net as of September 30, 2020 represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) Advanced Program. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of those same amounts presented in the accompanying consolidated statements of cash flows. September 30, 2020 December 31, 2019 Cash and cash equivalents $ 77,256 $ 67,030 Restricted cash included in Other current assets 133,899 — Restricted cash included in Other assets, net 16,324 16,261 Cash of discontinued operations — 1,396 Total cash, cash equivalents and restricted cash $ 227,479 $ 84,687 Note 2— Fair Value The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The carrying amount of restricted cash also approximates fair value due to its nature. The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 6 for the fair value of debt. The fair value of interest rate swaps and foreign currency contracts is determined based on the present value of expected future cash flows considering the risks involved, 8 Table of Contents including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 8 for the fair value of derivatives. Note 3— Discontinued Operations On June 18, 2020, we completed the previously announced divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $ 133 million. We concluded that the Movianto business met the criteria for discontinued operations as of December 31, 2019 and through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met. Movianto was previously reported in the Global Solutions segment. Accordingly, the results of operations from the Movianto business are reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the three and nine months ended September 30, 2020 and 2019, and the related assets and liabilities are classified as held-for-sale as of December 31, 2019 in the accompanying balance sheet. We are working with the Buyer on a final working capital adjustment that could result in a benefit in an amount up to $ 42 million. There is no benefit of any such adjustment reflected in our consolidated financial statements as of September 30, 2020. The following table summarizes the financial results of our discontinued operations for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net revenue $ — $ 106,265 $ 226,759 $ 324,308 Cost of goods sold — 24,399 53,923 78,729 Gross margin — 81,866 172,836 245,579 Distribution, selling, and administrative expenses — 81,565 157,512 245,562 Loss on divestiture — — 65,472 — Acquisition-related and exit and realignment charges — 383 4,825 774 Other operating income, net — ( 20 ) ( 388 ) ( 492 ) Operating loss — ( 62 ) ( 54,585 ) ( 265 ) Interest expense, net — 1,887 3,144 5,162 Loss from discontinued operations before income taxes — ( 1,949 ) ( 57,729 ) ( 5,427 ) Income tax provision from discontinued operations — 247 474 688 Loss from discontinued operations, net of tax $ — $ ( 2,196 ) $ ( 58,203 ) $ ( 6,115 ) We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No. 2016-02, for the nine months ended September 30, 2020. All revenue and expense included in discontinued operations during the nine months ended September 30, 2020 relates to activity through the Divestiture Date. No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date. We have entered into transition services agreements with a subsidiary of the Buyer, pursuant to which we and a subsidiary of the Buyer will provide to each other various transitional services. Certain transition service arrangement costs and reimbursements were recorded during the three and nine months ended September 30, 2020. These amounts were immaterial for the three and nine months ended September 30, 2020. 9 Table of Contents The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheet at December 31, 2019 were as follows: December 31, 2019 Assets of discontinued operations Cash and cash equivalents $ 1,396 Accounts receivable, net 78,643 Merchandise inventories 16,058 Other current assets 188,853 Current assets of discontinued operations 284,950 Property and equipment, net 65,710 Intangible assets, net 6,579 Other assets, net 27,431 Operating lease assets 87,425 Valuation allowance on disposal group classified as held-for-sale ( 32,112 ) Total assets of discontinued operations $ 439,983 Liabilities of discontinued operations Accounts payable $ 53,981 Other current liabilities 182,980 Current liabilities of discontinued operations 236,961 Long-term debt, excluding current portion 5,523 Operating lease liabilities, excluding current portion 76,270 Other liabilities 4,757 Total liabilities of discontinued operations $ 323,511 Assets and liabilities held-for-sale as of December 31, 2019 were classified as current since we expected the Divestiture to be completed within one year of the balance sheet date. The following table provides operating and investing cash flow information for our discontinued operations: September 30, 2020 September 30, 2019 Operating Activities: Depreciation and amortization $ — $ 15,466 Loss on divestiture 65,472 — Investing Activities: Capital expenditures 3,027 17,298 Note 4— Goodwill and Intangible Assets The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through September 30, 2020: Global Solutions Global Products Consolidated Carrying amount of goodwill, December 31, 2019 $ 283,905 $ 109,276 $ 393,181 Currency translation adjustments — ( 2,786 ) ( 2,786 ) Carrying amount of goodwill, September 30, 2020 $ 283,905 $ 106,490 $ 390,395 10 Table of Contents Intangible assets at September 30, 2020 and December 31, 2019 were as follows: September 30, 2020 December 31, 2019 Customer Relationships Tradenames Other Intangibles Customer Relationships Tradenames Other Intangibles Gross intangible assets $ 268,179 $ 90,000 $ 43,238 $ 270,693 $ 90,000 $ 43,055 Accumulated amortization ( 113,999 ) ( 22,791 ) ( 13,012 ) ( 92,947 ) ( 16,520 ) ( 9,263 ) Net intangible assets $ 154,180 $ 67,209 $ 30,226 $ 177,746 $ 73,480 $ 33,792 Weighted average useful life 10 years 11 years 8 years 10 years 11 years 8 years At September 30, 2020, $ 67.2 million in net intangible assets were held in the Global Solutions segment and $ 184.4 million were held in the Global Products segment. Amortization expense for intangible assets was $ 10.2 million and $ 10.6 million for the three months ended September 30, 2020 and 2019, respectively, and $ 31.5 million and $ 33.4 million for the nine months ended September 30, 2020 and 2019, respectively. Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $ 10.4 million for the remainder of 2020, $ 39.8 million for 2021, $ 38.9 million for 2022, $ 38.7 million for 2023, $ 33.9 million for 2024 and $ 28.2 million for 2025. Note 5— Exit and Realignment Costs We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses, our client engagement center and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment which include management changes, certain professional fees, and costs to streamline administrative functions and processes. Exit and realignment charges by segment for the three and nine months ended September 30, 2020 and 2019 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Global Solutions segment $ 2,714 $ 969 $ 6,255 $ 3,149 Global Products segment 2,877 11 3,364 252 Total exit and realignment charges $ 5,591 $ 980 $ 9,619 $ 3,401 11 Table of Contents The following table summarizes the activity related to exit and realignment cost accruals through September 30, 2020 and 2019: Total Accrued exit and realignment costs, December 31, 2019 $ 8,162 Provision for exit and realignment activities: Severance 1,391 Information system restructuring costs 183 Other 255 Cash payments ( 5,799 ) Accrued exit and realignment costs, March 31, 2020 4,192 Provision for exit and realignment activities: Severance 809 Information system restructuring costs 671 Other 720 Cash payments ( 2,072 ) Accrued exit and realignment costs, June 30, 2020 4,320 Provision for exit and realignment activities: Severance 1,950 Information system restructuring costs 77 Other 3,564 Cash payments ( 7,083 ) Accrued exit and realignment costs, September 30, 2020 $ 2,828 Accrued exit and realignment costs, December 31, 2018 $ 7,477 Provision for exit and realignment activities: Severance 360 Information system restructuring costs 261 Other 83 Cash payments ( 2,206 ) Accrued exit and realignment costs, March 31, 2019 5,975 Provision for exit and realignment activities: Severance 1,008 Information system restructuring costs 705 Other 4 Cash payments ( 2,301 ) Accrued exit and realignment costs, June 30, 2019 5,391 Provision for exit and realignment activities: Severance 305 Information system restructuring costs 664 Other 11 Cash payments ( 2,586 ) Accrued exit and realignment costs, September 30, 2019 $ 3,785 Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 0.8 million and $ 8.9 million for the three and nine months ended September 30, 2020 and $ 3.5 million and $ 11.4 million for the three and nine months ended September 30, 2019, respectively, and consisted primarily of transition costs for the Halyard acquisition. 12 Table of Contents Note 6— Debt Debt consists of the following: September 30, 2020 December 31, 2019 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value 3.875 % Senior Notes, due September 2021 $ 178,485 $ 180,307 $ 236,234 $ 229,356 4.375 % Senior Notes, due December 2024 244,697 245,122 273,978 212,086 Term A Loans, due July 2022 196,489 199,619 377,420 383,050 Term B Loan, due April 2025 478,127 475,913 480,337 442,217 Revolver 70,000 70,000 177,900 177,900 Receivables Securitization Program 147,580 150,000 — — Finance leases and other 13,371 13,371 13,783 13,783 Total debt 1,328,749 1,334,332 1,559,652 1,458,392 Less current maturities ( 229,104 ) ( 230,784 ) ( 51,237 ) ( 51,237 ) Long-term debt $ 1,099,645 $ 1,103,548 $ 1,508,415 $ 1,407,155 We have $ 178 million of 3.875 % senior notes due in 2021 (the 2021 Notes) and $ 245 million of 4.375 % senior notes due in 2024 (the 2024 Notes), with interest payable semi-annually. The 2021 Notes were sold at 99.5 % of the principal amount with an effective yield of 3.951 %. The 2024 Notes were sold at 99.6 % of the principal amount with an effective yield of 4.422 %. We have the option to redeem the 2021 Notes and 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100 % of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate plus 25 basis points for the 2021 Notes and the applicable Benchmark Treasury Rate plus 30 basis points for the 2024 Notes. In June 2020, we announced cash tender offers for up to $ 240 million aggregate principal amount of our outstanding 2021 Notes and 2024 Notes. As of the Early Settlement Date of June 22, 2020, $ 54.1 million of the 2021 Notes and $ 29.0 million of the 2024 Notes were repaid. On the Early Settlement Date, the 2021 Notes were redeemed at 100 % of par, and the 2024 Notes were redeemed at 90 % of par, resulting in a net gain on extinguishment of debt of $ 2.9 million. The tender offers remained open through July 2, 2020, and an additional $ 0.1 million of the 2021 Notes were redeemed at the Base Consideration price of 95 % of par by the time the offers closed. Including the tender offer, we used $ 83.3 million of cash to repurchase $ 87.9 million aggregate principal amount of the 2021 Notes and 2024 Notes during the first nine months of 2020. Consistent with the terms of the Fifth Amendment to the Credit Agreement, we used $ 54.1 million of the proceeds from the sale of Movianto to fund the repayment of the 2021 Notes, which were retired in the second quarter as part of the tender offer. As required by the Fifth Amendment to the Credit Agreement, the remaining $ 78.9 million of proceeds from the sale of Movianto were placed in a designated account and will be used to repurchase a portion of the outstanding 2021 Notes within 210 days of the Divestiture Date or repay a portion of our Term Loans. We have a Credit Agreement (last amended February 13, 2020) with a $ 400 million revolving credit facility and $ 675 million in outstanding term loans. The interest rate on our revolving credit facility and Term A Loans is based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage which varies depending on Consolidated Total Leverage Ratio (each as defined in the Credit Agreement). Our credit spread on the revolving credit facility and Term A Loans at September 30, 2020 was Eurocurrency Rate plus 4.25 %. Our Term B Loan accrues interest based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage of 3.50 % per annum for Base Rate Loans and 4.50 % per annum for Eurocurrency Rate Loans (each as defined in the Credit Agreement). Our credit spread on the Term B Loan at September 30, 2020 was Eurocurrency Rate plus 4.50 %. We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the revolving credit facility. Our Credit Agreement has a “springing maturity date” with respect to the revolving credit facility, the Term A Loans, and the Term B Loan. If the outstanding balance of the 2021 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2021 Notes, then the Termination Date (as defined in the Credit Agreement) of the revolving credit facility, the Term A Loans, and the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2021 Notes. Likewise, if the outstanding balance of the 2024 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2024 Notes, the Termination Date of the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2024 Notes. At September 30, 2020 and December 31, 2019, we had borrowings of $ 70.0 million and $ 177.9 million, respectively, under the revolver and letters of credit of $ 13.9 million and $ 11.7 million, respectively, outstanding under the Credit Agreement. At September 30, 2020 and December 31, 2019, we had $ 316.1 million and $ 209.3 million, respectively, available for borrowing. The December 31, 2019 availability reflected letters of credit associated with discontinued operations of $ 1.1 million. There were no letters of credit associated with discontinued operations as of September 30, 2020. We also had letters of credit and bank guarantees outstanding for $ 2.4 million, of which $ 0.8 million are in process of being transferred to 13 Table of Contents the buyer of Movianto, and $ 1.6 million and $ 1.5 million as of September 30, 2020 and December 31, 2019, respectively, which supports certain leased facilities as well as other normal business activities in the United States and Europe. These letters of credit and guarantees were issued independent of the Credit Agreement. We also have a Security and Pledge Agreement (the Security Agreement) pursuant to which we granted collateral on behalf of the holders of the 2021 Notes, the holders of the 2024 Notes, and the parties secured under the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries of each Credit Party and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions. The Fifth Amendment to the Credit Agreement included additional collateral requirements if the Credit Parties, including an obligation to pledge our owned U.S. real estate and the remaining equity interests in foreign subsidiaries. On February 19, 2020, we entered into an accounts receivable securitization program (the Receivables Securitization Program). Pursuant to the Receivables Securitization Program the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $ 325 million outstanding at any time. The interest rate under the Receivables Securitization Program is based on a spread over the London Interbank Offered Rate (LIBOR) dependent on the tranche period thereto and any breakage fees accrued. Under the Receivables Securitization Program, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Securitization Program matures on February 17, 2023. Our Receivables Securitization Program has a “springing maturity date” with respect to the Term A Loans. If the outstanding balance of the Term A loans have not been paid in full as of the date 91 days prior to the maturity date of the Term A Loans, then the Scheduled Termination Date (as defined in the Receivables Financing Agreement) of the Receivables Securitization Program shall be the date that is 91 days prior to the maturity date of the Term A Loans. In February 2020, we drew $ 150 million from the Receivables Securitization Program to repay portions of the Term A Loans, consistent with the terms of the Fifth Amendment to the Credit Agreement. The Fifth Amendment to the Credit Agreement requires that any additional draws on the Receivables Securitization Program are restricted for use to repay the 2021 Notes or Term A loans to the extent those instruments are outstanding. The Credit Agreement, Receivables Securitization Program, and Senior Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement. The terms of the Credit Agreement also require the company to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture. We were in compliance with our debt covenants at September 30, 2020. As of September 30, 2020, scheduled future principal payments of debt were $ 12.4 million in 2020, $ 228.5 million in 2021, $ 218.8 million in 2022, $ 155.0 million in 2023, $ 251.0 million in 2024, and $ 468.8 million thereafter. Current maturities include scheduled principal payments within the next 12 months of $ 44.6 million and $ 5.0 million for our Term A and Term B Loans, respectively, $ 1.0 million in short-term finance leases, and $ 178.5 million related to our 2021 Notes. Note 7— Retirement Plans We have a noncontributory, unfunded retirement plan for certain retirees in the United States. Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective employees. The components of net periodic benefit cost for the three and nine months ended September 30, 2020 and 2019, respectively, were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Service cost $ 362 $ 332 $ 1,073 $ 991 Interest cost 498 601 1,488 1,801 Recognized net actuarial loss 214 260 642 780 Net periodic benefit cost $ 1,074 $ 1,193 $ 3,203 $ 3,572 Note 8— Derivatives We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. We do not enter into derivative financial instruments for trading purposes. 14 Table of Contents We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. We pay interest under our Credit Agreement and Receivables Securitization Program, which fluctuate based on changes in our benchmark interest rates. In order to mitigate the risk of increases in benchmark rates, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount. The interest rate swaps were designated as cash flow hedges. Cash flows related to the interest rate swap agreements are included in interest expense. We determine the fair value of our foreign currency derivatives and our interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data. We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure. All derivatives are carried at fair value in our consolidated balance sheets in other assets, net and other liabilities. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items. The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of September 30, 2020: Derivative Assets Derivative Liabilities Notional Amount Maturity Date Classification Fair Value Classification Fair Value Cash flow hedges Interest rate swaps $ 300,000 May 2022 and May 2025 Other assets, net $ — Other liabilities $ 19,807 Economic (non-designated) hedges Foreign currency contracts $ 28,900 October 2020 Other assets, net $ 149 Other liabilities $ — We terminated $ 150 million in notional value of interest rate swaps on September 30, 2020. The remaining balance of the fair value adjustments of $ 10.7 million, which related to these terminated interest rate swaps within accumulated other comprehensive loss, will be recognized in interest expense ratably over the remaining life of the Term B Loan. The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2019: Derivative Assets Derivative Liabilities Notional Amount Maturity Date Classification Fair Value Classification Fair Value Cash flow hedges Interest rate swaps $ 450,000 May 2022 and May 2025 Other assets, net $ — Other liabilities $ 17,436 15 Table of Contents The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 30, 2020: Amount of Gain/(Loss) Recognized in Other Comprehensive Income (Loss) Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Income/(Expense) Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Interest rate swaps $ ( 515 ) $ ( 19,913 ) Interest expense, net $ ( 20,975 ) $ ( 65,923 ) $ ( 3,028 ) $ ( 6,889 ) The amount of ineffectiveness associated with these contracts was immaterial for the periods presented. The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 30, 2019: Amount of Gain/(Loss) Recognized in Other Comprehensive Loss Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Income/(Expense) Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Interest rate swaps $ ( 3,356 ) $ ( 15,933 ) Interest expense, net $ ( 24,050 ) $ ( 75,557 ) $ ( 632 ) $ ( 1,314 ) Foreign currency contracts $ ( 28 ) $ 608 Cost of goods sold $ ( 2,012,130 ) $ ( 6,176,537 ) $ 262 $ 319 The amount of ineffectiveness associated with these contracts was immaterial for the periods presented. For the three and nine months ended September 30, 2020, we recognized losses of $ 0.9 million and $ 2.3 million, respectively, associated with our economic (non-designated) foreign currency contracts. For the three and nine months ended September 30, 2019, we recognized gains of $ 0.1 million and $ 1.1 million, respectively, associated with our economic (non-designated) foreign currency contracts. We recorded the change in fair value of derivative instruments and the remeasurement adjustment of the foreign currency denominated asset or liability in other operating (income) expense, net for our foreign exchange contracts. Note 9— Income Taxes The effective tax rate was 13.8 % and 9.4 % for the three and nine months ended September 30, 2020, compared to ( 126.5 )% and 17.8 % in the same periods of 2019. The change in these rates resulted primarily from an income tax benefit recorded in the first and third quarters of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax expense associated with the vesting of restricted stock. In addition, the provision for income taxes reflects an increase in our reserve for uncertain tax positions for the three and nine months ended September 30, 2020 in connection with the IRS’ audit of our 2015 and 2016 consolidated income tax returns described in the subsequent paragraph. The liability for unrecognized tax benefits was $ 22.5 million at September 30, 2020 and $ 11.5 million at December 31, 2019. Included in the liability at September 30, 2020 and December 31, 2019 were $ 1.9 million and $ 3.1 million, respectively, of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Services (IRS) regarding our 2015 and 2016 Consolidated Income Tax Returns. Within the NOPA, the IRS has asserted that our taxable income for 2015 and 2016 should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United 16 Table of Contents States by our domestic subsidiaries. Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date. We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies, including those available under the U.S. - Ireland Income Tax Treaty to alleviate double taxation. We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves. We believe that we have adequately reserved for this matter and that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows. However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows. Note 10— Net Income (Loss) per Common Share The following summarizes the calculation of net income (loss) per common share attributable to common shareholders for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2020 2019 2020 2019 Weighted average shares outstanding - basic 60,786 60,030 60,983 60,498 Dilutive shares 137 — — — Weighted average shares outstanding - diluted 60,923 60,030 60,983 60,498 Income (loss) from continuing operations $ 46,081 $ 3,420 $ 37,332 $ ( 17,233 ) Basic and diluted per share $ 0.76 $ 0.06 $ 0.61 $ ( 0.28 ) Loss from discontinued operations $ — $ ( 2,196 ) $ ( 58,203 ) $ ( 6,115 ) Basic and diluted per share $ — $ ( 0.04 ) $ ( 0.95 ) $ ( 0.11 ) Net income (loss) $ 46,081 $ 1,224 $ ( 20,871 ) $ ( 23,348 ) Basic and diluted per share $ 0.76 $ 0.02 $ ( 0.34 ) $ ( 0.39 ) Note 11— Shareholders' Equity In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $ 50 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of September 30, 2020, no shares were issued and $ 50 million of common stock remained available under the at-the-market equity financing program. On October 6, 2020, we completed a follow-on equity offering as further described in Note 15 - Subsequent Events . 17 Table of Contents Note 12— Accumulated Other Comprehensive Loss The following table shows the changes in accumulated other comprehensive loss by component for the three and nine months ended September 30, 2020 and 2019: Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, June 30, 2020 $ ( 13,926 ) $ ( 23,471 ) $ ( 24,188 ) $ ( 61,585 ) Other comprehensive income (loss) before reclassifications — 5,173 ( 516 ) 4,657 Income tax — — 40 40 Other comprehensive income (loss) before reclassifications, net of tax — 5,173 ( 476 ) 4,697 Amounts reclassified from accumulated other comprehensive loss 214 — 3,028 3,242 Income tax ( 47 ) — ( 871 ) ( 918 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 167 — 2,157 2,324 Other comprehensive income 167 5,173 1,681 7,021 Accumulated other comprehensive loss, September 30, 2020 $ ( 13,759 ) $ ( 18,298 ) $ ( 22,507 ) $ ( 54,564 ) Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, June 30, 2019 $ ( 7,752 ) $ ( 29,306 ) $ ( 12,590 ) $ ( 49,648 ) Other comprehensive loss before reclassifications — ( 9,038 ) ( 3,384 ) ( 12,422 ) Income tax — — 1,314 1,314 Other comprehensive loss before reclassifications, net of tax — ( 9,038 ) ( 2,070 ) ( 11,108 ) Amounts reclassified from accumulated other comprehensive loss 260 — 370 630 Income tax ( 61 ) — ( 89 ) ( 150 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 199 — 281 480 Other comprehensive income (loss) 199 ( 9,038 ) ( 1,789 ) ( 10,628 ) Accumulated other comprehensive loss, September 30, 2019 $ ( 7,553 ) $ ( 38,344 ) $ ( 14,379 ) $ ( 60,276 ) Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, December 31, 2019 $ ( 14,691 ) $ ( 25,301 ) $ ( 12,715 ) $ ( 52,707 ) Other comprehensive loss before reclassifications — ( 8,577 ) ( 19,913 ) ( 28,490 ) Income tax — — 5,113 5,113 Other comprehensive loss before reclassifications, net of tax — ( 8,577 ) ( 14,800 ) ( 23,377 ) Amounts reclassified from accumulated other comprehensive loss 1,067 15,580 6,889 23,536 Income tax ( 135 ) — ( 1,881 ) ( 2,016 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 932 15,580 5,008 21,520 Other comprehensive income (loss) 932 7,003 ( 9,792 ) ( 1,857 ) Accumulated other comprehensive loss, September 30, 2020 $ ( 13,759 ) $ ( 18,298 ) $ ( 22,507 ) $ ( 54,564 ) 18 Table of Contents Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, December 31, 2018 $ ( 8,146 ) $ ( 32,551 ) $ ( 4,915 ) $ ( 45,612 ) Other comprehensive loss before reclassifications — ( 5,793 ) ( 15,325 ) ( 21,118 ) Income tax — — 5,204 5,204 Other comprehensive loss before reclassifications, net of tax — ( 5,793 ) ( 10,121 ) ( 15,914 ) Amounts reclassified from accumulated other comprehensive loss 780 — 995 1,775 Income tax ( 187 ) — ( 338 ) ( 525 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 593 — 657 1,250 Other comprehensive income (loss) 593 ( 5,793 ) ( 9,464 ) ( 14,664 ) Accumulated other comprehensive loss, September 30, 2019 $ ( 7,553 ) $ ( 38,344 ) $ ( 14,379 ) $ ( 60,276 ) We include amounts reclassified out of accumulated other comprehensive loss related to defined benefit pension plans as a component of net periodic pension cost recorded in Other expense, net. For the three and nine months ended September 30, 2020, we reclassified $ 0.2 million and $ 1.1 million, which included $ 0.4 million as a result of the Divestiture, respectively, of actuarial net losses. Amounts reclassified from accumulated other comprehensive loss for the nine months ended September 30, 2020 include currency translation adjustments released as a result of the Divestiture. For the three and nine months ended September 30, 2019, we reclassified $ 0.3 million and $ 0.8 million, respectively, of actuarial net losses. Note 13— Segment Information We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance. We report our business under two segments: Global Solutions and Global Products. The Global Solutions segment includes our United States distribution, outsourced logistics and value-added services business. Global Products manufactures and sources medical surgical products through our production and kitting operations. We evaluate the performance of our segments based on their operating income excluding intangible amortization, acquisition-related and exit and realignment charges, certain purchase price fair value adjustments, and other substantive items that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis. Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading and not meaningful. We believe all inter-segment sales are at prices that approximate market. 19 Table of Contents The following tables present financial information by segment: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net revenue: Global Solutions $ 1,865,182 $ 2,047,379 $ 5,261,415 $ 6,305,448 Global Products 473,797 359,835 1,235,391 1,070,808 Total segment net revenue 2,338,979 2,407,214 6,496,806 7,376,256 Inter-segment revenue Global Products ( 151,051 ) ( 114,462 ) ( 378,466 ) ( 355,960 ) Total inter-segment revenue ( 151,051 ) ( 114,462 ) ( 378,466 ) ( 355,960 ) Consolidated net revenue $ 2,187,928 $ 2,292,752 $ 6,118,340 $ 7,020,296 Operating income: Global Solutions $ 10,972 $ 24,916 $ 8,522 $ 64,292 Global Products 89,923 16,897 160,268 42,570 Inter-segment eliminations ( 8,718 ) ( 243 ) ( 10,322 ) 774 Intangible amortization ( 10,242 ) ( 10,614 ) ( 31,463 ) ( 33,395 ) Acquisition-related and exit and realignment charges ( 6,382 ) ( 4,522 ) ( 18,500 ) ( 14,776 ) Other (1) — ( 324 ) — ( 853 ) Consolidated operating income $ 75,553 $ 26,110 $ 108,505 $ 58,612 Depreciation and amortization: Global Solutions $ 9,572 $ 11,477 $ 31,273 $ 31,756 Global Products 11,118 13,128 38,221 40,982 Discontinued operations — 4,697 — 15,466 Consolidated depreciation and amortization $ 20,690 $ 29,302 $ 69,494 $ 88,204 Capital expenditures: Global Solutions $ 3,582 $ 2,743 $ 7,545 $ 7,280 Global Products 10,656 6,791 15,808 13,574 Discontinued operations — 3,087 3,027 17,298 Consolidated capital expenditures $ 14,238 $ 12,621 $ 26,380 $ 38,152 (1) 2019 included interest cost and net actuarial losses related to the U.S. Retirement Plan as well as Software as a Service (SaaS) implementation costs associated with the upgrading of our global IT platforms in connection with the redesign of our global information system strategy. 20 Table of Contents September 30, 2020 December 31, 2019 Total assets: Global Solutions $ 2,161,158 $ 2,205,134 Global Products 1,058,701 930,937 Segment assets 3,219,859 3,136,071 Discontinued operations — 439,983 Cash and cash equivalents 77,256 67,030 Consolidated total assets $ 3,297,115 $ 3,643,084 The following table presents net revenue by geographic area, which were attributed based on the location from which we ship products or provide services. Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net revenue: United States $ 2,101,074 $ 2,200,284 $ 5,872,143 $ 6,774,965 International 86,854 92,468 246,197 245,331 Consolidated net revenue $ 2,187,928 $ 2,292,752 $ 6,118,340 $ 7,020,296 Note 14— Recent Accounting Pronouncements In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework— Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss). We adopted ASU No. 2018-13 effective beginning January 1, 2020. Its adoption did not have a material impact on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant for companies with defined benefit retirement plans. The amendments in ASU No. 2018-14 are effective for fiscal years ending after December 15, 2020 and we do not expect this to have a material impact on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other (Topic 350): Internal-Use Software. This standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU No. 2018-15 effective beginning January 1, 2020. Its adoption did not have a material impact on our consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We do not expect this to have a material impact on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. The Standard is part of FASB’s ongoing project to improve and clarify its Accounting Standards Codification and avoid unintended application. The items addressed are not expected to significantly affect current practice or create a significant administrative cost for most entities. The amendment is divided into issues 1 to 7 with different effective dates as follows: The amendments related to Issue 1, Issue 2, Issue 4, and Issue 5 are conforming amendments. The amendments are effective upon issuance of this update. The amendment related to Issue 3 is a conforming amendment that affects the guidance related to the amendments in ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and 21 Table of Contents Financial Liabilities. The effective date of this update for the amendments to ASU No. 2016-01 is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments related to Issue 6 and Issue 7 affect the guidance in the amendments in ASU No. 2016-13, Financial 5 Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. For entities that have not yet adopted the amendments related to ASU No. 2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and transition requirements in ASU No. 2016-13, which will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted ASU No. 2020-03 effective beginning January 1, 2020 for Issues 1 through 5. Its adoption did not have a material impact on our consolidated financial statements. We are currently evaluating the potential impact of adopting this guidance for Issues 6 and 7 on our consolidated financial statements and disclosures. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We do not expect this to have a material impact on our consolidated financial statements. There have been no further changes in our significant accounting policies from those contained in our Annual Report on Form 10-K for the year ended December 31, 2019. Note 15— Subsequent Events On October 6, 2020, we completed a follow-on equity offering wherein we sold an aggregate of 8,475,000 shares of our common stock at an offering price of $ 20.50 , resulting in net proceeds to us of approximately $ 165 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions. Pursuant to the underwriting agreement, we granted the underwriters an option to purchase up to an additional 1,271,250 shares of our common stock, which the underwriters exercised in full. Inclusive of this exercised option, net proceeds to us were approximately $ 190 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions. We used the proceeds from the follow-on equity offering to repay the remaining $ 109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $ 52 million of our Term Loan A-2 at par on October 15, 2020, and to repay $ 30 million of borrowings under the revolving credit facility. On October 30, 2020, we issued a notice of redemption to redeem all of our outstanding 2021 Notes on November 30, 2020 (the “Redemption Date”). The redemption price will include accrued and unpaid interest to, but not including, the Redemption Date, and a redemption premium, equal to the greater of (i) 100 % of the principal amount of the 2021 Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the Redemption Date) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points.